Time is running out for the long-term jobless, the Wall Street Journal reported this morning. Note the term “jobless” rather than “unemployed”: It’s an important distinction, with major implications for both short-term economic policy and the U.S.’s long-term growth prospects.

Anyone watching the economy over the past few years has heard that the government only considers people “unemployed” if they’re actively looking for work. That makes sense, at least in normal times: People can be without jobs for lots of reasons — retirement, school, childcare, a prolonged illness — that have little to do with the state of the economy. Economists mostly care about the people who would be working if they could — in other words, people who are looking for jobs.

It’s no surprise, then, that many Americans have given up looking for work. Officially, there are about a million “discouraged” workers, people who have stopped looking for a job because they don’t believe they can find one. But the Labor Department uses a fairly narrow definition of “discouraged” — workers have to be available to work right now, and they have to have searched in the past year. A full accounting of the discouraged would need to include those who have retired involuntarily, taken refuge in school, filed for disability or otherwise hidden from the brutal job market.

Those people are victims of the recession, but they don’t count as “unemployed.” The question for economists is how many of them will eventually return to the job market.

It’s a question that’s absolutely central to understanding the state of the economy, both now and in the future. If most of those who have given up will eventually return, then they are, for all intents and purposes, “unemployed” –which means the official 7.4% unemployment rate substantially understates how bad the job market is. That’s terrible news in the short-term, because it means the recovery is even weaker than the official numbers suggest. But it’s actually good news in the long run, because it means there’s no reason the economy can’t ultimately get back to its prerecession peak. And for policymakers at the Federal Reserve and elsewhere, it means there’s no reason to ease up on efforts to boost the economy — in fact, quite the opposite.

If, on the other hand, most of the dropouts are gone for good, then traditional stimulus efforts aren’t likely to help much — and could lead to higher inflation. The economy is running closer to its potential — there’s less “slack,” in economic jargon — than the existence of all those discouraged workers might suggest. That means it takes less job creation to bring down unemployment than it used to, but it also means that the economy’s long-run growth rate has slowed.

The trouble is that no one knows how many of the “missing” workers will eventually come back. The U.S., unlike Europe, has little experience with high levels of long-term unemployment, which means economists don’t know how labor-force drop-outs will respond when the economy improves.

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